GraniteShares HIPS US High Income ETF

HIPS

Market cap $110M

Closed-end funds offer some powerful strategies within their specific, tight rules. By limiting when investors can interact with them, said funds can take deep, long-term investment strategies and lean in, aiming to deliver powerful returns.

In a recent educational webcast, Rewriting the Income Playbook Kirsten Chang, senior industry analyst at VettaFi, joined GraniteShares founder and CEO Will Rhind and product specialist Matt Lamb to explore how autocallable ETFs are reshaping the income investing landscape. Key Takeaways Core fixed income is failing to meet client retirement needs.

In today's market, income investors remain firmly focused on one objective: yield. With traditional sources of income still under pressure, demand for high-income ETFs continues to grow — especially those capable of delivering consistent monthly payouts.

Income-focused investors have had plenty of factors to keep in consideration as of late. The latest CPI report showed that consumer prices rose at an annual rate of 2.6% in December, which was actually 0.1% lower than expectations.

GraniteShares HIPS US High Income ETF receives a renewed "Sell" rating due to persistent underperformance and structural capital erosion. HIPS invests equally in CEFs, BDCs, REITs, and MLPs, all categories suffering long-term capital decay despite high yields. Since the 2023 index change, HIPS underperformance relative to a benchmark got worse.

Investors are increasingly looking beyond traditional stocks and bonds to meet their income goals. One fund drawing attention for its generous yield is the GraniteShares HIPS US High Income ETF (HIPS).

GraniteShares HIPS US High Income ETF offers high yield via diversified exposure to REITs, CEFs, MLPs, and BDCs. HIPS's 11.2% yield is attractive, but persistent NAV erosion and underperformance versus alternatives raise concerns about long-term capital preservation. The fund pays out more than it earns, relying on past strong years, making future dividend sustainability questionable without a distribution cut.

The GraniteShares HIPS US High Income ETF (HIPS) tracks the EQM High Income Pass-Through Securities Index, equally weighting 40 holdings across MLPs, BDCs, CEFs, and REITs. HIPS is a volatile, risk-on fund with a 3-year standard deviation of 14.2% and a Sharpe ratio of 0.42, experiencing significant drawdowns. Due to NAV erosion in components like Annaly (NLY), which lost 50% in price over a decade, HIPS is not ideal for long-term holding.

Weekly income ETFs are booming, with new funds leveraging 0DTE options strategies to generate high-yield, frequent distributions for passive income seekers. Roundhill, YieldMax, Rex Shares, and GraniteShares have all launched innovative ETFs offering weekly payouts, each with unique strategies and underlying assets. While yields are attractive—some exceeding 20% annually—these funds are new, so investors should monitor performance and understand the risks involved.

HIPS offers a high dividend yield of 10.8% and monthly distributions, making it attractive for income-focused investors, especially retirees. The fund blends REITs, CEFs, MLPs, and BDCs, aiming for tax-efficient distributions with at least half as return of capital. Higher interest rates negatively impact HIPS, but lower rates could boost its performance, making it a potential buy for long-term investors.